RIL’s CBM plant to undergo price settings due to govt. pressure

Published: Wednesday, May 18, 2011, 9:30 [IST]

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Considering it as a pressure from the government, sources claim that Reliance Industries Limited is set to work on their pricing decisions for the Coal Bed Methane Gas plant in three blocks from Sonhat and eastern plus western Sohagpur areas of Madhya Pradesh.

Out of the five blocks of RIL"s CBM plant in Madhya Pradesh which were completed by early 2009, the company is now being pushed by the centre to start formulating a detailed pricing formula that can establish a benchmark for CBM gas prices in the Indian oil and gas sector.

Final pricing, however, would be combined decision of existing power and fertilizer industries in the domestic market before it is presented to the government.

The present production capacity of Reliance backed CBM blocks ranges to a total of 3.6 trillion cubic feet gas if we go by the official reports of Directorate General of Hydrocarbons although the company is yet to decide on the ways of gas evacuation from the respective blocks.

It"s fascinating to point out what effect this pricing would bring for RIL"s counterpart and country"s largest coal based methane gas producer GEECL or Great Eastern Energy Corporation Limited which at present produces 0.16 million standard cubic meters of gas each day from its Raniganj, West Bengal project. The government approval which was pending for last 7 years for this block is expected be gained by GEECL by this year along with a makeshift gas price of around $6.75 per million Btu.

Since the sales and revenue flow from this project are in their infancy if compared RIL"s big petroleum business, it is the allowance of CNG retail rights and gas distribution across Shahdol city of Madhya Pradesh that the company is rejoicing over. CNG or Compressed Natural Gas is an equivalent of CBM gas containing 5-10 percent of methane.